Online trading is extremely popular these days either in the form of stocks, options or forex. The majority of the companies that offer online trading services claim that you can make a lot of money by trading online without actually having to invest a lot of time and effort.
Below you’ll find a lot of reasons why this isn’t exactly true:
Did you watch The Wolf of Wall Street? The way brokers are being represented in that movie is precisely how most online trading brokers function these days as well… only that they will let YOU lose all the money.
They will approach you will promises of massive income that you will be able to cash in without much effort. Then, they will persuade you to deposit as much money as possible, claiming that the more you invest the more profits you will make.
However, unlike Leonardo DiCaprio in The Wolf of Wall Street, these brokers will not execute trades on your behalf. Instead they will let you make your own decisions, resulting in you losing your money yourself. This way they can’t be held liable for any losses, since it was actually you who traded and not they.
Like in the movie, these online brokers will make a commission on every transaction you make regardless if you win or lose. So, basically they couldn’t care less about you. They are just in for the commissions that they will get after you.
Probably the most dangerous form of online trading are binary options. Binary options are at this moment very popular in the USA. This form of trading is dangerous because all the money you lose will go to the broker, so the broker will have a direct incentive to determine you to lose money.
Forex is very similar, however it’s safer, since the lost money will not go to the broker. In this case the broker is not necessarily interested in you losing. Nevertheless, they will still earn a commission for every transaction you make.
It’s not necessarily a scam it’s just that normal people can’t make money.
The reason why these forms of online trading are not illegal is because they aren’t necessarily a scam. Online trading is perfectly legitimate and can indeed make certain people a lot of money. These people are called professional investors and traders.
The same way a random person can’t perform brain surgery, the same way a random person also cannot become a “professional trader overnight”. This is why all these claims that you can make money with online trading while you are sleeping are completely ridiculous.
All those people in The Wolf of Wall Street that have invested money in the shady companies promoted by the DiCaprio’s brokerage firm believed that they can become rich as well overnight without actually having to work anything at all.
The same is being promised by all the online brokerages as well, be it forex, stocks or binary options. So, be smarter than them and stay away from online trading no matter what kind of offers you may be getting.
Trading that can actually make you money.
There are however forms of trading both online and offline that can indeed make you money without you actually having to do anything. These are called investment funds, hedge funds, retirement funds, mutual funds and others.
The difference between these and he online brokers is that these companies will actually invest your money themselves and will only make money if you make money as well. In other words, these investment funds will not charge you a commission per transaction but will charge a percentage of your profits.
So, if your investment is not profitable then the investment funds will lose money themselves. They have a direct incentive to make you profits, as otherwise they themselves will end up empty handed.
The “disadvantage” of these funds is that they can’t promise you supermassive profits in short time. However, remember, “supermassive profits in a short time” is nonsense anyway, so if an online trading broker promises this to you then it’s not like that it’s going to happen.
So, in short, if you want to invest money and do not personally have the knowledge and skill to do so then you can do this at large and reputable investment funds. Under no circumstance do this at online trading brokers, as you will just lose all your money.
I think the best way is to start investing and trading with small amount of money. As you become expert in online trading that is the time you can increase your capital.
There are traders that make money. However, 99 out of 100, or something like that, lose money. I went to InvesTools, On Line Trading Academy, and a few others. They are all great courses, but the end of it is, most traders lose money. Plain and simple.
I will have to agree and disagree with a couple things here =) You are absolutely right brokers make money whether you lose money or make money and they are not looking out for you best interest. But to be fair there are a lot of brokers out there and not all of them lack integrity. I believe the same can be said about investment funds as well in all reality. I have traded FOREX, commodities, options, and stocks in my lifetime, I was awful at first but have gotten a lot better over time. I believe the one thing we can all agree on is that every single person should strive to educate themselves financially. At the very least we should all understand what strategies, theories, or concepts these individuals are trying to pitch.
Having just come across this article I thought it was worthwhile posting an update. Due to legislation, Binary Options brokers are no longer able to offer their services and indeed most are unwilling to, to US clients. The few that do remain unregulated and it is not advisable to trade with an unregulated broker as we all know. Nadex is however open to US clients though whether this actually offers any benefits for the trader remains to be seen.
One point of issue I have with what is written is that Forex is safer? I think no matter what the brokers involvement, the fixed risk of Binary Options is a lot safer on the pocket of the casual trader than the margin losses that can be quickly racked up in a Forex account.
I totally agree with Marvins comment however, in that the individual has to educate themselves in order to protect their own interests when it comes to finance. If it looks to good to be true then it DEFINITELY is.
I know traders who make money online with trading forex and binary options..